NEW YORK -British Telecommunications plc will undertake “a massive, massive restructuring, and I don’t want to underestimate what we plan to do this year,” Sir Peter Bonfield, chief executive officer, told securities analysts at a recent meeting here.
Under the umbrella of a new group holding company, the United Kingdom’s largest carrier is setting up six discrete lines of business. These include Yell, responsible for Yellow Pages directories and Internet service provision, and BT Wireless, comprising domestic and foreign cellular and PCS assets. The Genie Internet portal, now in operation in six countries, will become part of BT Wireless on April 1.
“We have made a big investment in Genie. We also were first to launch GPRS in the U.K. and Germany. Trials are set up with about 40 major companies linking PCs to about 100,000 handsets,” Bonfield said.
“We plan a mass deployment mid-year to switch on consumers when there is greater availability of handsets and applications.”
Second-generation wireless data already is showing satisfactory results, the chief executive added. Of the 10.2 million domestic BT subscribers, 1 million are WAP customers. Some 1.4 million of the 10.5 million customers of foreign carriers in which it owns a stake also are WAP users.
“There has been some question about WAP, but we actually are quite pleased with our WAP rollout,” Bonfield said.
If British Telecommunications has its way, it also will establish this year a separate company called NetCo to manage its fixed-line network in the United Kingdom. NetCo would go public in 2002, according to current plans.
“This would be a world first. No one has tried this before. It needs U.K. government and regulatory approval,” Bonfield said.
British Telecom hopes to raise $7.5 billion through initial public offerings of Yell by summer and BT Wireless by year-end. It also plans to divest its interests in Spain’s Airtel through another IPO this year.
BT, which won third-generation wireless licenses in the United Kingdom, Germany, the Netherlands, Spain and Japan, now has $45 billion in outstanding debt. This includes $20 billion in bond issues sold during the past six months.
“When we won, we thought it was a great idea. When we had to pay for it (3G licenses), we thought it was a less good idea,” Bonfield said.
Under pressure from credit rating agencies to decrease its outstanding debt, the operator hopes to reduce its leverage by raising $15 billion in new equity through asset and stock sales this year, he said.
However, Moody’s Investors Service Inc. is not optimistic that British Telecom will be able to execute these plans. Consequently, it issued an alert March 19 saying it is reviewing whether to downgrade BT’s investment-grade, long-term debt ratings, now A2, “by more than one notch, though it should not exceed two.”
Eric de Bodard and Carlos Winzer, two Moody’s analysts based in London, where BT is headquartered, said they believe the “depressed equity markets” are likely to impede the carrier’s plans to sell stock before the spring of 2002.
“Moody’s will also review the extent to which business risk might be increasing due to (BT’s) exposure to the increasingly competitive German wireless market, as well as growing concerns related to the progress and costs involved in developing third-generation networks,” they said.
British Telecom’s agreement with Crown Castle International to share most cell sites needed for 3G deployment specifically is intended to address issues of “costs, health hazards and aesthetics,” Bonfield said.
In another move to capitalize on its assets, the telecommunications operator has established the BT Technology Co., “initially as a wholly owned subsidiary,” he said. Under its aegis is the Brightstar incubator, which seeks to exploit commercially the 12,000 patents in British Telecom’s portfolio.
“We have 11 companies in Brightstar now. We have spun out three businesses so far, each in the $20 (million) to $30 million range, and we have retained ownership in a few,” Bonfield said.
